Accounting Final Exam Study Guide

Myers Corporation has the following data related to direct materials costs for November: actual cost for 5,000 pounds of material at $4.50 per pound and standard cost for 4,800 pounds of material at $5.10 per pound. The direct materials quantity variance is

$1,020 unfavorable LEARN***

Thomlin Company forecasts that total factory overhead for the current year will be $15,500,000 with 300,000 total machine hours. Year to date, the actual factory overhead is $16,000,000 and the actual machine hours are 330,000 hours. If Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, as of this point in time (year to date), the overhead is

$500,000 overapplied

Jaxson Corporation has the following data related to direct labor costs for September: actual cost for 10,200 hours at $15.75 per hour and standard costs for 10,800 hours at $15.50 per hour. The direct labor hours variance is

$9,300 favorable LEARN***

Which of the following ratios indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

contribution margin ratio

Starling Co. is considering disposing of a machine with a book value of $12,500 and estimated remaining life of five years. The old machine can be sold for $1,500. A new high-speed machine can be purchased at a cost of $25,000. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $26,000 to $23,500 if the new machine is purchased. The five-year differential effect on profit from replacing the machine is a(n)

decrease of $11,000 LEARN***

Which of the following should be ignored when preparing the cash budget?

depreciation expense

In the manufacture of 10,000 units of a product, direct materials cost incurred was $165,000, dire labor cost incurred was $105,000, and applied factory overhead was $53,000. The total conversion costs is

direct labor + factory overhead (FOH) = 105,000 + 53,000 = $158,000

Jensen Company reports the following: Direct materials used $345,000 Direct labor incurred 250,000 Factory overhead incurred 400,000 Operating expenses 175,000 Jensen Company's product costs are

direct materials + direct labor + factory overhead (FOH) = $995,000

Activity rates are determined by

dividing the cost budgeted for each activity pool by the estimated activity base for that pool

A disadvantage of static budgets is that they

do not allow for possible changes in activity levels

Which of the following is an example of a factory overhead cost?

factory heating and lighting cost

If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would

increase

The primary difference between a static budget and a flexible budget is that a static budget

is a plan for single level activity, whereas a flexible budget adjusts for changes in the activity level

Period costs include

operating costs that are shown on the income statement in the period in which they are incurred

When applied factory overhead is more than actual factory overhead, the result is called

overapplied factory overhead

Which of the following is false with regard to direct materials for a bakery?

paper cupcake liners, that become part of the product, must be accounted for as direct materials

For which of the following businesses would process costing be appropriate?

paper mill

Which of the following is a cost pool used with the activity-based costing method?

production setups

Using multiple department factory overhead rates instead of a single plantwide factory overhead rate

results in more accurate product costs

The first budget customarily prepared as part of an entity's master budget is the

sales budget

Budgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following situations will likely lead to human behavior problems?

setting goals too loosely, creating a budgetary slack

For which of the following businesses would process costing be appropriate?

shampoo manufacturer

A favorable cost variance occurs when

standard costs are more than actual costs

A cost that has been incurred in the past, cannot be recouped, and is irrelevant to future decisions is termed a

sunk cost

Contribution margin is

the excess of sales revenue over variable cost

Which of the following would be inappropriate as an allocation base for calculating factory overhead rates?

total units produced

Jase Manufacturing Company's static budget for 10,000 units of production includes variable costs of $40,000 for direct labor and $4,000 for electric power. Total fixed costs are $24,000. At 12,000 units of production, a flexible budget would show

variable costs of $52,800 and $24,000 of fixed costs LEARN***

Rowan Quinn Company manufactures kitchen appliances. Currently, it is manufacturing one of its components at a variable cost of $40 and fixed costs of $15 per unit. An outside provider of this component has offered to sell Rowan Quinn the component for $45. Determine the best plan and calculate the savings assuming fixed costs are unaffected by the decision.

$5 savings per unit if manufactured LEARN***

Stephanie Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 108,000 units, and desired ending inventory is 90,000 units. The quantity of direct materials expected to be used for each unit of finished product is 0.5 pound per unit at $0.70 per pound. The dollar amount of materials used in production during the year is

$217,700 LEARN***

Which of the following is an example of direct materials cost for an automobile manufacturer?

cost of interior upholstery

The following data relate to direct labor costs for August: actual costs for 5,500 hours at $24.00 per hour and standard costs for 5,000 hours at $23.70 per hour. The direct labor rate variance is

$1,650 unfavorable LEARN***

Which of the graphs in Figure 1 illustrates the behavior of a total fixed cost?

Graph 1

Which of the graphs in Figure 1 illustrates the behavior of a total variable cost?

Graph 3

Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15 per unit. The unit cost for the business to make the part is $20, including fixed costs, and $11, not including fixed costs. If 30,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, the amount of differential cost increase or decrease from making the part rather than purchasing it would be a

$120,000 cost decrease LEARN***

Winston Company estimates that the total factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated toe be 50,000 hours. The total machine hours for the year were 54,300. The actual factory overhead for the year was $1,375,000. Determine the overapplied or underapplied amount for the year.

$17,500 underapplied

Myers Corporation has the following data related to direct materials costs for November: actual cost for 5,000 pounds of material at $4.50 per pound and standard cost for 4,800 pounds of material at $5.10 per pound. The direct materials price variance is

$3,000 favorable LEARN***

Good Eats Inc. manufactures flatware sets. The budgeted production is for 80,000 sets this year. Each set requires 2.5 hours to polish the material. If polishing labor costs $15 per hour, the direct labor cost budget for polishing for the year would be

$3,000,000 LEARN***

Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $30 per pound and costs $28 per pound to produce. Product C would sell for $55 per pound and would require an additional cost of $31 per pound to produce. What is the differential cost of producing Product C?

$31 per pound LEARN***

The total factory overhead to be allocated to each unit of Hooks is

$33 LEARN***

At the beginning of the period, the Cutting Department budgeted direct labor of $153,000, direct materials of $162,000, and fixed factory overhead of $15,000 for 9,000 hours of production. The department actually completed 10,000 hours of production. The appropriate total budget for the department, assuming it uses flexible budgeting, is

$365,000 LEARN***

The total factory overhead to be allocated to Nooks is

$488,000 LEARN***

Jacoby Company received an offer from an exporter for 30,000 units of product at $15 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price $21 Unit manufacturing costs: Variable 12 Fixed The differential revenue from the acceptance of the offer is

30,000 x 15 = $450,000

If fixed costs are $700,000 and the unit contribution margin is $17, the amount of units (rounded to the nearest whole unit) that must be sold in order to realize an operating income of $100,000 is

47,059 units LEARN***

The number of equivalent units produced with respect to direct materials costs is

48,000 LEARN***

Motorcyle Manufacturers, Inc., projected sales of 78,000 machines for the year. The estimated January 1 inventory if 6,500 units, and the desired December 31 inventory is 6,000 units. The budgeted production for the year is

78,000 + 6000 = 84,000 84,000 - (6,500) = 77,500 units

Discontinuing a product or segment is a huge decision that must be carefully analyzed. Which of the following would be a valid reason to continue an operation?

Variable costs are less than revenues

Jensen Company reports the following: Direct materials used $345,000 Direct labor incurred 250,000 Factory overhead incurred 400,000 Operating expenses 175,000 Jensen Company's period costs are

$175,000

Woodpecker Co. has $296,000 in accounts receivable on January 1. Budgeted sales for January are $860,000. Woodpecker Co. expects to sell 20% of its merchandise for cash. Of the remaining 80% of sales on account, 75% are expected to be collected in the month of sale and the remainder the following month. The January cash collections from sales are

$984,000 LEARN***

Thomlin Company forecasts that total factory overhead for the current year will be $15,500,000 with 250,000 total machine hours. Year to date, the actual overhead is $16,000,000 and the actual machine hours are 330,000 hours. The predetermined overhead rate based on machine hours is

15,500,000/250,000 = $62 per machine hour

Fixed costs are $250,000, the unit selling price is $125, and the unit variable costs are $73. The break-even sales (units) if fixed costs are reduced by $30,000 is

250,000 - 30,000 = 220,000 220,000/(125 - 73) = 4230.7 = 4,231 units

Fixed costs are $250,000, the unit selling price is $125, and the unit variable costs are $73. The break-even sales in units (rounded to the nearest whole unit) is

250,000/(125 - 73) = 4,807.6 = 4,808 units

Pinnacle Corp. budgeted $700,000 of overhead cost for the current year. Actual overhead costs for the year were $650,000. Pinnacle's plantwide allocation base, machine hours, was budgeted at 100,000 hours. Actual machine hours were 80,000. A total of 100,000 units was budgeted to be produced and 98,000 units were actually produced. Pinnacle's plantwide factory overhead rate for the current year is

700,000/100,000 (hours) = $7.00 per machine hour

The number of equivalent units produced with respect to conversion costs is

DOUBLE CHECK

Indirect labor and indirect materials are classified as

a factory overhead and product costs

Southern Company is preparing a cash budget for April. The company has $12,000 cash at the beginning of April and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during April. Southern Company has an agreement with its bank to maintain a minimum cash balance of $10,000. To maintain the required balance during April, the company must borrow

$2,500 LEARN***

Strait Co. manufactures office furniture. During the most productive month of the year, 3,000 desks were manufactured at a total cost of $59,000. In the month of lowest production, the company mad 1,125 desks at a cost of $38,000. Using the high-low method of cost estimation, total fixed costs are

59,000 - 38,000/3,000 - 1,125 = 21000/1875 = 11.2 FC: 59,000 - (11.2 x 3,000) = $25400